Microsoft has launched an anti-piracy campaign highlighting the risk posed by Windows knockoffs to discourage potential Chinese buyers. After purchasing 169 PCs with bogus copies of Windows, Microsoft found that more than 90 percent contained malware, such as keyloggers and spyware, or deliberate security vulnerabilities.

Statistically, Microsoft's sample doesn't provide enough information to draw a conclusion on the percentage of such compromised PC in China. However, there's little doubt on the economic damage caused by counterfeit software. The Business Software Alliance pegs the value of the illegal software market at $9 billion in China versus $2.7 billion for the legal market.

Beyond the financial impact on Microsoft, PCs compromised through bogus copies of Windows oftentimes end up as zombies within botnets used to spread spam and malware outside of China, including the U.S., experts say.

"Compromised PCs running unpatched versions of pirated copies of commercial operating systems are routinely used in DDoS [distributed denial of service] and other botnet abuses," said Neal Quinn, chief operating officer of Prolexic. "It happens in many countries, not just China."

Chinese cybercriminals would unlikely build domestic botnets, because of the performance problems that would arise from the Chinese government filtering all Internet traffic coming in and going out.

"One defensive advantage we have here is the Great Firewall," said Andy Ellis, chief security officer for Akamai.

However, compromised systems exported to other countries, such as Thailand, South Korea, Malaysia and Vietnam, would make good botnet candidates, said Dan Olds, an analyst for Gabriel Consulting Group.

In September, Microsoft took down a major botnet that used malware distributed through counterfeit Windows in PCs built in China and sold in stores in and outside the country. The Nitol botnet spread malware that included keyloggers, rootkits and Trojans. The Nitol malware also was found in the latest PCs bought by Microsoft.

The threat also goes beyond Windows. It is not unusual for crooks in China to sell counterfeit Office with Windows as a package, adding another layer of malware or intentional vulnerabilities.

PC sellers often take the illegal software, because the deal offered by criminals is too good to pass up. Rather than buy a legitimate copy of Microsoft software, they often get the bogus version for free and are sometimes even paid to carry it. "The choice gets pretty obvious," Olds said.

Where compromised systems resides mean little to people running botnets, since the malware within the PCs can be controlled through a server in any location, said Mary Landesman, a senior security researcher at Cisco. Spreading a botnet across multiple countries makes it more difficult for law enforcement to take the network down.

"There's no benefit to an attacker to have all of the machines [in one country]," Landesman said. "In fact, it's to their detriment to have all of the machines located in the same physical locale."

This story, "Compromised Windows PCs bought in China pose risk to U.S." was originally published by
CSO.